The No-Brainer

In 11th grade, I purchased shares of Central Transport Rental. At $15 a share with a 10 percent dividend, I convinced myself that it was a no-brainer. I was right -- no brains! It went up to about $19 and then plunged. It’s now around 75 cents per share. I learned a lot from this. I did no research and didn’t follow the stock. It was the No. 1 freight-car producer in Europe at the time, which was enough for me. Now, I read everything, track companies and look up estimates. I was a fool; now I am a real Fool. -- Charles Pecoraro, Rochester, N.Y.

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The Fool Responds: While a 10% dividend may sound appealing, it might also reflect a company in trouble. When a stock crashes, its dividend yield (because it is expressed as a percentage of the stock price) automatically surges. Such a company might then reduce or eliminate its dividend. Congratulations on earning your capital “F” at such a young age.

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